The old adage for May from Wall Street veterans is to ‘go away’, meaning summer is coming, sell and take your profits and come back in September. Not this year, with gains so far in 2016 scarce and the outlook for more volatile trading and growing concerns about a commodity bubble.
In other words, confidence is weak, investors wary and no one has any idea of what will happen – as we saw this week with the Fed sitting on rates and the Bank of Japan doing likewise.
The former was expected, the latter was unexpected and that knocked investor confidence levels at the end of what was a very mixed month.
Locally the market’s future direction will be set by the three bank interim profits this week, starting with Westpac today, then the ANZ and then the NAB.
As well, there’s the RBA’s May board meeting and possible rate cut, and then the Federal budget on Tuesday night, followed by the calling of a double dissolution poll by May 11.
The rate decision will influence markets (and the dollar, which ended at just over 76 US cents yesterday morning), the budget won’t.
April in fact ended up being a sort of ‘marking time month’ enlivened by the very unexpected rebound in commodities (driven out of China), led by iron ore, aluminium, nickel and oil. It was a rally that also saw the share prices of some of the major producers of those commodities rebound strongly over the month.
Friday saw red ink endings to the week, but not here where the ASX rose 0.5%. But eurozone shares sold off sharply, losing 2.4%, and the US S&P 500 lost half a per cent as tech stocks fell.
Friday night saw ASX futures trading end in the red with a small loss of 6 points expected at the start.
But ignore that, the tone of the market will be set by the release of the Westpac interim before trading starts at 10am.
A solid report from Westpac with a higher dividend and small rise in bad debts will be good news, but anything less and the banking sector would weaken, taking the rest of the market with it.
Interim reports from the ANZ tomorrow and NAB on Thursday will add to the pressure, while Macquarie releases its full year figures on Friday.
Over the week, US shares fell 1.3%, eurozone shares lost 2%, Japanese shares fell 5.2% and Chinese shares fell 0.7% but the Australian market rose 0.3%.
This wrapped up a mostly positive month for shares with Australian shares up 3.3% and modest gains in US (half a per cent) and Eurozone shares (1.2%), but losses for Japanese and Chinese shares.
On Friday night the Dow fell 57.12 points, or 0.3%, to 17,773.64, the S&P 500 lost 10.51 points, or 0.5%, to 2,065.3 and the Nasdaq (down 5.1%) dropped 29.93 points, or 0.6%, to 4,775.36.
The weekly losses were 1.3% for both the Dow and S&P, but the Nasdaq fell 2.7% as tech majors such as Apple (down 11%) and Netflix were sold off, but Facebook and Amazon rose by more than 6% thanks to their solid first quarter results.
It was the largest weekly drop for the Dow since the week to February 12, and for the S&P and Nasdaq the declines were the largest going back to February 5, according to data from FactSet.
For the month, only the Nasdaq ended in negative territory with a loss of 1.9% (all of which happened last week).
